Many ICOs are Fake – How Can You Identify Those?

Many ICOs are Fake – How Can You Identify Those?

If statistics are to be believed, startups have raised more than $2 billion through ICOs in the last 8 months. Owing to the ease of the process, fewer formalities involved, and frenzy surrounding crypto, ICOs have become the easiest way for entrepreneurs to raise money. All they need is a minimum viable product, a strategy doc (usually a whitepaper that contains future course), a good PR campaign, and you are all set to raise $10, $20 or maybe $100 million in one round.

If you don’t believe this, read a little about Telegram App’s ICO, which has earned it $850 million so far – and the funding is still in progress.

But, human beings have a tendency to take (unfair) advantage of the opportunities – and the crypto-market is no different. You will find a number of media reports covering incidents of fraudulent ICOs and fake token sales. While the majority of the sales are based on “high-quality, and high-value projects”, a number of them are based on fake or copycat projects with no value for the people buying the tokens.

This is a concern shared by many industry players including founders of Ripple, Ethereum, and others. You may be thinking, is there any mechanism or formula to identify fake ICOs from the real ones?

No, there is no exact formula to identify a fake ICO, but some indicators can help you locate a fraudulent startup. In the following, we’re giving you 4 suggestions to identify if a token sale is real or fake.

1 – Read their Strategy Doc

While it’s true that startups are genetically ambitious, there is a lot of difference between vision and wishful thinking. The first sign of a copycat startup is its wishful thinking or overly ambitious agenda for the future – like 500% appreciation in one quarter.

If their websites or whitepapers have the headlines or catchy keywords like “Only Profits, No Loss”, “Guaranteed 300% return in 2 months”, you should be alert and start checking other sources immediately. They are either fraudulent business or have no idea about how to make trustworthy calculations.

2 – See Who’s on the Team

One of the easiest ways to identify a fake ICO is to investigate the team behind the project. Usually, they have either irrelevant people on the website, or have fake ones altogether. If you could do a simple research on the project team, it can save you lots of effort, money, and regret.

One big example here is of Empire Token’s ICO. They had a website, but when you visit it, the links to their member’s profiles were broken. If you search them via names or pictures, you’ll not find them on any social network or Google. This is a major indicator that the company and its project are deceitful.

3 – Checkout Their Code

One key indicator of an authentic ICO is that aspiring startups put their code repositories on GitHub. All you need is to do a little research on their code. If you don’t have the expertise, ask your developer to identify if the code has some value or if its just 2000 lines of with nothing of substance. Remember, code determines the value and reliability of their minimum viable product (MVP) – and is the most critical part of the ICO assessment.

4 – Seek Recommendations

One of the best ways to locate the scammers is to check the word of mouth on the web and industry forums. Check out what people are saying about them, and if you find any confusion, post an open-ended question on the forum/social networks. People’s feedback and answers should guide you to make the right decision.

In the end, we would like to reassert the importance of proper research before making an investment decision. In order to make a confident investment decision, search for the ICOs that have credible MVP, a well-thought-out whitepaper, credible team of professionals, and a good market repute. If you find any element missing from the profile, we recommend you to hold your decision.

At InWage, we help startups and entrepreneurs companies raise funds via initial coin offerings. If you want to read more about the ICOs and how to do a successful token sale, we recommend you read our founder’s advice on Forbes Magazine.

Interested In Running An ICO?
Provide Your Email And We Can Help Out.